Letter reveals 7 of 13 DC council members support Exelon-Pepco merger

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Dive Brief:

In a letter sent earlier this month and obtained Wednesday by Utility Dive, seven of the 13 members of the District of Columbia Council asked the District of Columbia Public Service Commission (PSC) to approve the acquisition of Pepco Holdings by Exelon Corp. The merger would create the largest electric utility in the nation.

The councilmembers told the PSC they "believe the proposed merger settlement is in the public interest," referencing enhanced investments in the city promised by Exelon under a deal reached with Mayor Muriel Bowser (D) early this month. PSC staff confirmed they had received the letter, which was dated Oct. 16.

While D.C. lawmakers have no formal role in the merger approval process, regulators noted the lack of a consensus over the merger when they rejected an initial proposal from Exelon in August. The PSC today reopened the merger docket, allowing Exelon to proceed with its appeal. Approval by the D.C. regulators is the final regulatory hurdle for Exelon to clear before its acquisition can be finalized.

Dive Insight:

In the letter, the councilmembers tell regulators they are convinced the proposed merger settlement would result in improved system reliability, more renewable energy and increased investment and employment in the District, among other benefits. They also note that a number of intervenors once opposed to the merger nowsupport the settlement.

Signing the letter represents a shift in opinion for Nadeau and Todd, both of whom submitted comments to the PSC expressing serious concerns about the initial merger proposal filed with regulators.

Merger opponents counted both Nadeau and Todd as a part of a group of six city lawmakers who previously disapproved of the merger, along with Mary Cheh (D-Ward 3), Charles Allen (D-Ward 6), Elissa Silverman (I-At Large), and David Grasso (I-At Large). Those four councilmembers remain opposed to the merger.

Nadeau's office on Wednesday posted the letter to its website along with an explanation of her evolution on the deal. None of the other signatories have returned requests for comment from Utility Dive.

PSC staff said the letter has not yet been posted on the commission website because the merger docket was reopened earlier today.

"Once the Order is issued re-opening the record, the Commission will inform the public about submitting (or re-submitting) letters to the merger docket," Kellie Didigu, media relations specialist at the PSC, wrote in an email to Utility Dive.

The signatories to the Oct. 16 letter reflect a similar group that opposed a controversial budget rider regarding Pepco this summer.

In June, a budget provision to fund a study of public utility alternatives to Pepco was gutted from the spending bill on the final day before it was sent to the mayor. That vote featured a nearly identical coalition to the signatories on the Oct. 16 letter, except for Nadeau, who did not support striking the study. She was replaced by Councilmember Vincent Orange (D-At Large), a former Pepco executive who did not sign on to the letter because he has recused himself from the case.

While city lawmakers have no formal say over whether the PSC approves the merger, a show of solidarity with the merger parties could help sway commission members. In their initial rejection, regulators noted the absence of a clear consensus on the merger as one of the reasons they failed to approve it.

Approval by the PSC represents the final hurdle Exelon must clear to finalize its merger with Pepco. In August, regulators rejected the utility's initial merger proposal, prompting Exelon tolaunch a public relations campaign in the District, recruiting popular former mayor Anthony Williams to publicly call for Bowser, his former mentee, to support the merger.

Exelon and the mayor reached a deal in early October, as Utility Dive reported.

Wednesday, the PSC voted to reopoen the merger docket, allowing Exelon's appeal of the initial merger rejection to proceed from where it left off, rather than starting over from the beginning. That timeline was critical for Exelon, whose CEO threatened to walk away from the deal earlier this week if the process took more than five months. In reopening the merger docket, regulators scheduled public hearings on the docket for the first week of December, meaning they could rule on the acquisition before the end of the first quarter of 2016.

The stakes in the merger proceeding are high for Exelon. The predictable income of Pepco's utility business could help hedge against risks from a generation portfolio that includes many older nuclear plants running on the verge of unprofitability in PJM markets.